clearing and trade reporting were
to utilise blockchain you could also
put regulators in the win column.

Blockchain – if proper standards
are introduced and it is regulated
– could contribute to increased
transparency and a reduction of
risk in the market.

Buy-side in control of liquidity

A shift across the industry was
seen this year, with the command
of liquidity shifting from the
sell-side to the buy-side. This has
been particularly strong in fixed
income markets. In the US, a poll
conducted by Worldwide Business
Research found 68% of finance
professionals believe the buy-side
holds the key to unlocking liquidity
in fixed income markets.

This is quite the role reversal
compared with the pre-financial
crisis era, when the majority of
liquidity was held by the sell side.
Trading and execution platforms
now have the potential to unlock
more liquidity and this is seen in
the shift towards electronic trading
across markets. Liquidity is now in
the hands of the buy-side and the
challenge ahead is moving the liquidity from buy-side books, rather
than sourcing it.

Mega-exchanges

The world’s major exchange
groups have been rapidly acquiring
companies and each other over the
past few years and we move into

2017 with two of the biggest deals
yet sitting on the table.

Deutsche Boerse is currently
awaiting regulatory approval for its
proposed merger with the London
Stock Exchange Group. The deal
will be one of the biggest mergers
seen in Europe in recent years and
will create an exchange behemoth
that dominates European equities,
derivatives and clearing.

In the US meanwhile Chica-go-based derivatives exchangeCBOE is planning to buy BatsGlobal Markets. While Bats is arelatively young exchange operatorit has quickly become globally rele-vant after it acquired Chi-X Europeand it has also recently made a for-ay into other asset classes such asFX. This deal will create one of thebiggest players in the US and willbecome a global entity to rival thelikes of Intercontinental Exchange,which has acquired NYSE back in2013.

The end of the one-stop shop

It used to be that the buy-side
could almost exclusively focus on
their relationship with big, full
service brokerage provided by the
major investment banks. These
giants once provided almost everything an asset manager could need,
from execution to capital commitment to TCA to market data, it was
all found at these sell-side one-stop
shops.

But markets are changing and
brokers are no longer able or willing to provide so much to the buy-side. Greater capital requirements
and a changing competitive market
mean that much of the sell-side
now views its non-core bundled
services as loss-making. Furthermore some sell-side banks are now
also taking a view that large parts
of their client base are no longer
profitable either and they’re being
cut as well.

Buy-siders will need to dealwith a wider variety of differentproviders for the various tools andservices they want and will needto do more themselves as they findbrokers are no longer willing toprovide them with everything for asimple bundled cost.

Data, data, data

The need for comprehensive and
all-encompassing data is going
to increase in the coming years.
Regulators are already expecting the
buy-side to do a lot more with much
of the data they already use, but the
future will see them tapping brand
new data sources and trying to make
sense of the big data conundrum.

Best execution and transaction
cost analysis are going to become
core to what the trading desk does
moment to moment, requiring
real-time analysis of complex data

feeds to inform trading decisions.
The trader of the future will inevitably need to be a serious data wizard, making the complex array of
data dance to their tune and inform
them in ways that were previously
unimaginable.

Advancing technology also opens
up new channels of data from social media to sentiment and… who
knows, one day we may even find
smart devices such as automated
vehicles, smart home assistants and
mobile phones will start streaming
into these data feeds providing
ever more detail on how market
sentiment might change over the
course of the day. The future is all
about using data.

“The trader of the future will inevitably need
to be a serious data wizard, making the
complex array of data dance to their tune and
inform them in ways that were previously
unimaginable.”